Three years back, Elon Musk was briefly in the news for this statement:
“Goods & services are the real economy, any form of money is simply the accounting thereof.”
That tweet was absolutely correct…but it displeased a lot of less savvy types, including a few who argued that Musk’s statement was tantamount to claiming that “money isn’t real.”
I’m not about to return to the old debate about “what is real?” My ventures into metaphysics are mostly utilitarian. (There’s a concept for you! Utilitarian metaphysics! It’s gonna be big, I tell you. Get in on the ground floor while you still can.)
Well, anyway. Today’s item of general interest is this somewhat surprising turnaround by one Donald J. Trump:
In a sharp reversal, former President Donald Trump has embraced the cryptocurrencies he once reviled, looking to outflank rivals Joe Biden and Robert F. Kennedy Jr. among the technology’s devoted young fan base — and its deep-pocketed executives.
Hours after meeting with bitcoin miners at his Mar-a-Lago estate in Florida on Wednesday, the former president said on his Truth Social media platform that cryptocurrency users should “vote for Trump!” because he will stand up to “Biden’s hatred of Bitcoin.”
[…]
But just a few years ago, when Trump was in the White House, he made his thoughts on bitcoin and other cryptocurrencies clear.
“I am not a fan of Bitcoin and other Cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air,” he said in a series of social media posts in 2019 while he was still in office. “Unregulated Crypto Assets can facilitate unlawful behavior, including drug trade and other illegal activity.”
“We have only one real currency in the USA,” Trump continued, “And it will always stay that way. It is called the United States Dollar!”
To someone deeply interested in fiscal theory and the history of money and currency, this was a sharp jab in the side: “Heads up, Fran!” And indeed, it indicates that President Trump has been thinking seriously about a very serious subject.
I’m no fan of the cryptocurrencies. They’re subject to the same objections as any other fiat currency, with the added vulnerability of anything digital that’s manipulated on a worldwide communications net. But as long as there are vendors of goods and services who are willing to trade their wares for a cryptocurrency payment, they constitute real currencies. Thus, they provide something that Americans have needed since March 5, 1933: competition for the U.S. dollar.
Once again, quoth Brian Loasby:
The argument for competition rests on the belief that people are likely to be wrong…. In the end, the case against an authoritarian system of resource allocation rests on the same principle as the case against an authoritarian structure in any discipline: part of the case…is that no person or body of persons is fit to be trusted with such power; the (other) part…is that no one person or group of persons can say for sure what new knowledge tomorrow will bring. Competition is a proper response to ignorance. [Loasby, Choice, Complexity, and Ignorance]
The variety of ignorance on trial in the world of competing currencies is one that’s recently come into sharp relief: Among the currencies now extant, which ones are likely to hold their value – i.e., their purchasing power – best?
When the American dollar was competing solely with the currencies of other nations signatory to the Bretton Woods agreement, there was in fact no competition. All those “competing” currencies were linked to the dollar by that agreement. Few currencies of significance were utterly independent of the dollar. Moreover, one of the world’s vital resources – oil – was traded internationally solely in dollars, giving the U.S. an immense advantage in the international bourse.
The cryptocurrencies don’t play that game. The rules under which they operate are separate. They cannot be inflated or otherwise manipulated by any nation’s central bank; in particular, their volumes are limited by their “mining rules.” Thus they constitute a true competitor for national currencies of significance.
The Democrats, wholly dependent on “coalition politics” (i.e., vote-buying), are scared shitless by the cryptos for that reason. If a significant volume of trade “abandons” the dollar for one or more of the cryptocurrencies, the jig will be up. The superior stability of the cryptos will become highly visible, a matter of general interest and discussion. Movement away from the U.S. dollar, already largely drained of its historical purchasing power, will accelerate. Inflating the dollar, the Democrats’ traditional technique for “expanding” or “solidifying” their coalition, will be seriously endangered.
If President Trump has come to understand this – i.e., if his turnaround isn’t just a political stroke – then more power to him. It would be even better were he to work to restore the redeemability-in-specie that once protected the dollar’s purchasing power, but all things in their proper sequence.